The compound interest (compounded annually) on a sum of money invested for two years is ₹10125. If the rate of interest is 25% per annum, then what is the amount after these two years?
Answer & explanation
Correct answer: option 1
From the formula for compound interest, we know,
C.I = P(1+$\frac{R}{100})^t$– P
10125 = P [ 1 + \(\frac{25}{100}\) ]² - P
10125 = P [ \(\frac{5}{4}\) × \(\frac{5}{4}\) - 1 ]
10125 = P[ \(\frac{9}{16}\) ]
P = 18000
We know,
Amount = Principal + Compound Interest
= 18000 + 10125
= Rs. 28125